Global Poverty

We have posted in the past on the fact that global poverty is falling.  This work helps quantize it rather well.  This also tells us that the ideological debate is long over.  Everyone knows what needs to be done and it looks as if progress is taking place almost everywhere.  At worst we are waiting for a few bad actors to get out of the way.

 

The big changes took place in south Asia and Latin America and accounted for most change.  In fairness, the next big wave of economic improvement will be visibly in Africa.  The cell phone is empowering the people hugely.

 

The remaining laggards are mostly in the Islamic Middle East but not the Islamic Far East.  They are determined to proceed slowly it seems.

 

It really informs us just how massively the world has changed in just the past thirty five years.  1970 was the end of the recovery stroke from the Second World War.  The next decade saw consolidation and minor liberalization.  The last twenty five years saw the adoption of modern methods by both China first and then India and Brazil with many others getting on board along the way.

 

China has now entered consolidation and India will also begin consolidation in another decade.  That does not mean a lack of growth so much as that everyone who is able to actively participate is.  Their strength will strongly accelerate Africa’s response.

 

The hard thing to get used to is that the US economy is continuing to fade proportionally and to have less an less impact on the global economy.  When you have spent your entire life checking US numbers as the present best case, you have a habit to break.  China is now our largest car maker having grown fifty percent this past year.  Those percentage jumps are still hard to accept.  Yet the reality is there while we drift.

 

 

 

Global Poverty Progress - Model Income Past, Present and Future

January 22,2010

http://nextbigfuture.com/2010/01/global-poverty-progress-model-income.html

 

There is an analysis of the model income of the world from 1970 and 2006. Model income is the level of income that is most common in the world. The graphs show on the left vertical the population with a particular income level and the bottom horizontal shows the income level. In 1970 about 50 million people had $500 of income per year. In 2006, About 100 million had $5000 of income per year.

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World poverty is falling. Between 1970 and 2006, the global poverty rate has been cut by nearly three quarters. The percentage of the world population living on less than $1 a day (in PPP-adjusted 2000 dollars) went from 26.8% in 1970 to 5.4% in 2006. 1970 to 2006, poverty fell by 86% in South Asia, 73% in Latin America, 39% in the Middle East, and 20% in Africa.

An Attempt to Project Foreward 40 Years on Model Income

Goldmans Sachs had a forecast of GDP for the top 22 countries until 2050 and this was used to approximate world GDP growth. Using wikipedia estimates of future population the mean average GDP per capita was calculated. This was used to approximate the shift in modal income into the future. 

There are several ways that this method could be off. 

1) The Goldman Sachs estimates could be wrong. In particular China's GDP is projected by some to be 20% of Goldmans estimate and some have it 200% of Goldman Sachs. Disruptive technology such as molecular nanotechnology, super robotics, cheap nuclear fusion or AGI could arrive and alter the economic picture.

2) The World GDP may not track proportionally with the GDP of the top 22.

3) The modal income may not shift exactly in proportion to the mean income.

4) The population projection could be off

The biggest source of error is the first and the degree of possible error shrinks for the factors listed.

https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhPcj6-h4Wrdzeq-NU-EmzaiEZSlkG2AXmUAB3qYtkzQlre2bxPaF3ml1uE8scjiZrzEbXLg5nTJn8_u2vjHMdydJ1bVxTL4FJGbR94_s54mihUVTUXvAEPYOg9gpOVpWfrSG7bGCfgfLEx/s640/worldgdpGoldman2050.jpg

Projected Modal Income is on the last line of the table.

High Speed Rail

I have to thank Chris Nelder again for waking me up to the present emerging reality of high speed rail transport success throughout the developed world in particular. This is his newsletter report.

Because we in North America have dragged our feet on this, we are at best largely ignorant of the fact that a number of jurisdictions elsewhere have fully embraced it with outstanding success.

Like the Wind turbine industry, there was a long period of technology proofing that was needed and bluntly unavoidable. Geothermal in the Americas is now passing through just such a period.

Two hundred MPH trains were a scary proposition thirty years ago. Today they are an extremely mature technology with an unbeatable track record. They turn out to be perfect for point to point trips taking up to four or more hours. At 200 mph this means travelling almost a thousand miles. Few routes are yet that long and most of the important ones are usually a couple of hundred miles to five hundred miles. This somewhat reflects the original slower train passenger system that induced the urban center building originally.

What is immediately clear is that such a train is superior to air transport over those distances. It is competitive on energy costs, ticket cost, and traveler comfort and on time usage. Even more important, the end points can and are built into the city’s central transport system rather than outside the city because of land needs.

The immediate result is that these rails immediately outrun expectations in terms of passenger miles. For that reason, there is now a building boom of these systems as governments pick off the low hanging fruit. They actually pay for themselves.

We went through a similar experience in Vancouver. Twenty five years ago we built a normal speed elevated track from Vancouver center out into the valley about twenty some miles. There were few obvious centers along the route and it was completely new technology. It went immediately to ridership levels well beyond original hopes and over the past years high rise development at the stations has reshaped city and suburb development completely. This has led to further additions and the recent opening of the Canada Line which connects the growing suburb of Richmond and the airport to the city center again. Again, it has been well received and related bridge traffic has been sharply curtailed. The trip now takes perhaps a total of thirty minutes at max and more likely for most riders about half that.

Again, all this is through normal speed systems over short hauls but its influence on the shape of a city is exceptional. These systems work because it allows the traveler to bypass bottlenecks and traffic jams.

For example, there is nothing wrong with the LA traffic system that a network of elevated trains would easily cure. The city already has a freeway based grid, since there is no other way to build for the haulage trade and for necessary automobile traffic. Within each such grid, there is a natural center of gravity towards which internal bus service moves. Linking those points with trains that pass traffic to the other grid squares is obvious. As a result, a huge fraction of your commuter population would be able to comfortably shift.

The natural progression is toward high speed links between large cities. In Canada we have natural pairings between Montreal and Toronto that could be easily linked the cities of Guelph, Kitchener, London, Windsor and on to the Detroit – Chicago pairing. The whole trip might be done under six hours. In Alberta, Calgary to Edmonton is again low hanging fruit. It is just a bit too long to drive it too often unless you really need your vehicle there. On the West coast, a Vancouver to Seattle and on to Portland is also a natural option if it is high speed.

Nelder’s report provides a map laying out the obvious options in the USA.

We have already posted on the huge expansion taking place in the wind business because it is mature and easy to finance and its job creation potential. Chris points out the same arguments for rail links.

As I have also maintained, the oil industry needs to be displaced as fast as possible. Right now, it is maintaining production status quo. It is plausible that this level could be maintained until such time as we have major field failure such has happened at Cantrel in Mexico.

Rail technology is proving itself to be one of the best ways to divert a large chunk of the problem, both internally in cities and to mid range distances.

The best markets today on the basis of population density are China India, and Europe and the US Northeast. The next decade will see much of this been built out because it can be done quickly.

The High Speed Rail Boondoggle

By Chris Nelder Friday, October 2nd, 2009

"'Boondoggle‘, 'Loss-making whim‘, ‘Monument to bad territorial planning'. . .

Such are the arguments of high speed rail critics, as the United States finally gets on board the passenger rail revolution that is sweeping the world.

But that quote wasn't about the U.S., and it wasn't about today's debate.

It came from an essay by José Blanco López, Spain's minister of transport and public works, which was published in a new pamphlet from SERA, a sustainability activist organization within the government Labour party. He was talking about the two decades of opposition that conservatives had mounted against the country's progress in building a high speed rail system.

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Starting with a line from Madrid to Seville in 1989, Spain pursued an aggressive and determined commitment to high speed rail that, by 2012, will produce the longest system in Europe. This year alone, most of the country's €19 billion development budget will be invested in high speed rail. By 2020, López says, more than 90% of the country's total population will be within 31 miles of a high speed train station.

Here he put his country's achievement in perspective:

Shielded behind overly simple, short sighted cost-benefit analysis, critics complained with those arguments against high speed projects over years, until the success of each one of the new corridors proved them wrong and showed that in troubled economic times, the best investments for a society are the ones which improve equality.

History has proved rail's critics wrong in Spain, as economic development and rider enthusiasm followed it everywhere it went.

Cretinous Shortsightedness

Even so, ever unwilling to learn from the successes of the rest of the world, the U.S. is now starting the same effort at about the same place as Spain was 20 years ago.

The president of the U.S. High Speed Rail Association, Andy Kunz, appeared on Fox Business last Friday to make his pitch. And what argument did the show's overcoiffed co-host raise? "Amtrak has been in the red for years and years and years, and nobody in charge over there seems to be able to turn a profit, despite the fact that everybody I know takes the train from New York to Washington D.C., the Acela. It's just not working though financially," she whined.

After Kunz explained that that the Acela leg (with a maximum speed of only about 100 mph) was in fact profitable, and that the rest of the system needed to be upgraded so that it was equally attractive and profitable and capable of speeds over 200 mph, the host pressed on: "How do you get people to ride it?" Kunz patiently explained his point again, and pointed out that when Europe opened its new high speed lines, they filled up with riders immediately. The hosts then tossed off a quick wisecrack about the Chunnel and muttered about the need for profitability, but assured the audience that "Nobody more than Fox Business wants to see new ventures succeed."

Be that as it may, one wonders why Europe's success would not convince them that high speed rail would be a good thing for this country. A projection from rail proponents FourBillion.com indicates that building the 9,000 miles of high speed corridors identified by the U.S. Department of Transportation would create 4.5 million permanent jobs and 1.6 million construction jobs, save 125 million barrels of oil, eliminate 20 million pounds of CO2 per mile per year, reinvigorate U.S. manufacturing, and generate $23 billion in economic benefits in the Midwest alone — all alongside a long list of intangible side benefits.

Putting aside the cretinous shortsightedness and obstinacy of conservative media, let's take a look at what the rest of the world is doing.

A Global High Speed Rail Explosion

The UK's Labour party is also pursuing an expansion of high speed rail, having commissioned a study on building a new line from London to the West Midlands and extensions to the north. Currently, Britain has only one high speed line, the 69-mile-long "High Speed 1" link from London to the aforementioned Channel Tunnel ("Chunnel") to France. The Tories have offered their own £15.6 billion plan, so it seems likely that Britain will soon have a new high speed project.

France, as I mentioned last year, already has the wonderful 200 mph high speed TGV network, with 1,100 miles of track, more than 400 trains and the third-highest ranking of rail passengers per year, behind Switzerland and Japan. Personally, I found it to be the most enjoyable travel experience I have ever had.

This week, the Chinese government awarded a $4 billion contract to build 80 high speed (236 mph maximum) electric train sets for the new 3,700-mile-long high speed train network it is building. Half of the contract went to Bombardier Sifang, a Chinese joint venture with Berlin-based rail giant Bombardier Transportation (TSE: BBD.A). The company will begin delivering the trains in 2012 and finish by 2014— boom, done.

Bombardier is already building 20 sleeper trains for China and another 20 passenger trains, in addition to the 500 high-power electric freight locomotives that it contracted to build for China in 2007.

Russia is taking the plunge into high speed rail as well, spending nearly $1.5 billion to upgrade 401 miles of track between Moscow and downtown St. Petersburg, and buy eight electric Sapsan trains made by German conglomerate Siemens (ETR: SIE) with a top operating speed of 217 mph. Four runs a day will make the trip in less than four hours, compared with an average five hours to make the trip by airplane, including the time wasted getting to and from the airport and running the check-in and security gauntlets.

Meanwhile, Back in the States. . .

Calling the U.S. "a developing country in terms of rail," a Siemens representative told the New York Times last week that his company was a candidate for a proposed high speed link between San Francisco and Los Angeles, along with Bombardier and Japanese bullet train manufacturer Hitachi.

The California line is on the short list of high speed rail priorities prepared by the America 2050 group, ranking it fifth nationally in terms of ridership demand behind four other lines for the Northeast.

http://images.angelpub.com/2009/40/3055/chart-1-us-map.png

High Speed Rail Phasing Map by America 2050. Source.

SCNF, the French company that runs the TGV network, has submitted its own plan to the U.S. Federal Railroad Administration (FRA) for four 220 mph corridors in California, Florida, Texas, and the Chicago-Midwest area. The company believes it could open the first line from Milwaukee to Detroit by 2018 and be in full operation by 2023. The costs would be recouped quickly, according to SNCF, returning triple the $69 billion cost of the Midwest corridor within 15 years in environmental and other benefits.

All Costs Considered

Building America's high speed rail network will be expensive — about that, there is no disagreement. The $8 billion appropriated for high speed rail in the stimulus plan was dwarfed by the $103 billion in applications the FRA received for the funds, and is a small fraction of what the total network will cost. The California run alone will probably cost over $40 billion to construct, and that's after the state's existing commitments to building support networks and light rail links.

On the other hand, as the director of the BART light rail system pointed out this week in a his testimony to San Francisco city supervisors with the city's Peak Oil Preparedness Task Force, the U.S. currently spends as much on parking as it does on national defense. I haven't run the numbers, but it seems within reason that if that is the case, spending that money instead on high speed and light rail would cover a very large part of the total cost.

Indeed, all of the cost arguments I have heard against rail are incomplete and wrong.

The true costs of remaining committed to our current road and air infrastructure are never taken into full account. . . like the health care costs of polluted air; the cost of continuously maintaining roads, bridges and tunnels; the availability of materials (remember, several cities in America literally could not buy asphalt during the oil frenzy of last year, because refiners were cracking every last lighter molecule they could from the crude); the trillions of dollars we are spending on oil imports and defense operations in oil producing regions of the world; the billions' worth of damage that our current ways do to the environment; the insurance costs of keeping up 240 million cars and light trucks; the damage and death that those millions of drivers cause; and so on, ad infinitum.

Rail is cheaper, safer, and better on every single count.

When the boundaries are properly defined, the entire transformation of transportation from liquid fuels to renewable electricity would create millions of permanent jobs, and could probably pay for itself.

But the cost isn't really the point anyway.

The Future: A No-Fly Zone

America still has no energy plan, let alone a plan to address the looming threat of peak oil. With the decline of global oil production starting around 2012 already "baked in," due to a lack of sufficient oil megaprojects, we desperately need to start making tracks toward a high speed rail infrastructure. . . or face a painful future of fuel shortages and economic dislocation (at best).

No part of our transportation system is as vulnerable to volatile fuel prices as the airline industry. It was built on the expectation that oil would rarely cost more than $40 a barrel, and it is completely dead if oil stays over $100 a barrel. Last year's oil price spikes put many smaller carriers out of business and cost the major carriers billions. Then the operators who had the largest hedges against rising prices last year got whacked again as prices plummeted.

For my money, the airline industry may as well be dead. Not just because of the damage that oil price volatility has done and will continue to do — and not just because the experience of air travel has become a painful routine of delays and personal insults — but because it's so inferior in every way to high speed rail travel for distances under 500 miles. The TGV line from Paris and Lyons virtually eliminated air travel between those cities, and the high speed line from Madrid to Barcelona cut air travel in half in the first year of its operation.

Forward-looking investors would be wise to accumulate long positions in some of the major players in high speed rail, which have enjoyed a very nice rally over the last three months, as the next wave of investments in it began to hit the press:

I continue to believe that rail — particularly high speed rail — is the longest safe bet one can possibly make. As I have explained in this column over the last several years, we simply cannot replace enough gasoline- and diesel-burning cars with ones that run on electricity to address the peak oil challenge in the time we have left.

Like compressed natural gas vehicles, PHEVs and EVs are "silver BBs" that will help cushion the blow, but in the long term and for the majority of miles traveled, rail is truly the only answer. Rail is by far the cheapest and most fuel-efficient form of transport, requiring about a third less fuel than air for personal travel, and as little as 3% of the energy for freight.

The serious pursuit of high speed rail would also make a real and significant dent in CO2 emissions, and enable part of the urgent transformation we must accomplish from liquid fuels to renewably generated electricity. As Lord Andrew Adonis, Britain's transport secretary, put it in the SERA publication: "High speed rail is now pretty well a ‘no-brainer' transport strategy for the 21st century."

The rest of the world is already kicking our butts in deploying renewable energy. China is running circles around us in long term resource planning and buying up every hard asset under the sun. And compared with the rest of the developed (and developing) world, we're bringing up the rear in rail.

But it doesn't have to be that way.

It's Go Time

If you've watched any of the new Ken Burns series on America's national parks, you know that protecting the common good has always been a struggle against vested interests and conservatives resistant to change. It took strong-willed men of vision like Teddy Roosevelt, John Muir, and Stephen Mather to override the opposition and do the right thing for the future. We need that kind of leadership now.

If I were President Obama, I would direct the Department of Transportation to immediately begin transforming America's infrastructure to one based on electric rail, regardless of the long-term cost, starting with the highest potential traffic and fuel savings and working our way down the list from there. I would do as the French did when they created the TGV: Declare eminent domain and lay in the high speed rails where they make the most sense. I would restrict federal funding for roads and bridges to critical maintenance projects where rail can't take over the load in time — with not a penny more spent on new car-based infrastructure. I would forbid any subsidies for cars and trucks with a fuel economy of less than 30 mpg. I would move all subsidies for fossil fuels into renewable energy — then double or triple them — to ensure that we can run that new electric infrastructure cleanly. I would bind Congress to my purpose and ride roughshod over the objectors, making it my number-one priority.

I know it may seem hard to believe, with oil holding steady around $70 and gasoline around $3. . . but if you haven't studied the data, then take the word of a guy who has: We're in serious trouble, folks. The Armageddon of transportation is dead ahead and we need to move aggressively and determinedly to head off the peak oil challenge. Rail is hands-down our best and biggest shot.

Until next time,

G20 to Phase out fossil Fuel Subsidies

This is one step that I can agree with and that every country can enable as a common action. If all are doing this, there is no lobby argument that stands at all.

Now if we could now do the same thing with agricultural subsidies world wide making it a condition for maintaining the right to trade a given commodity. The subsidy game has been a way to play beggar my neighbor and has merely led to mutual damage unless you think free trade in agricultural goods between Europe and north America is unsustainable.

In fact the developed countries have all subsidized their agriculture to a huge degree an a competition to the bottom. This has meant that we have a form of consumer subsidy going on that is distortive. It has made it difficult for everyone else to break into our markets.

The good news is that developing countries are getting wise to the game and are starting to create working offsets to move their product and their own subsidies of course. In time, it will all sort itself out.

In the meantime, China and India have robust agricultural sectors whose expansion in output is easily keeping up with demand. A famine threatens in India and it is easy to divert global reserves to the Indian market.

Anyway, the simple application of a price guarantee for wind power and geothermal power will swiftly see the carbon based industry replaced though simple replacement as plants cycle to the end of their lives. Even early windmills are now been replaced with better gear.

As I have posted, we are going to see the oil supply drop from 85 million barrels per day to a stable 50 million barrels per day or less over the next decade or so. That is why the explorers are finally tackling the likes of politically volatile West Africa and just about any place with a hope in an attempt to sustain present levels. The shoe really has not dropped yet but it will take very little to expose our vulnerability and force the globe into oil rationing.

G20 leaders agree to phase out fossil fuel subsidies

by Staff Writers

Pittsburgh, Pennsylvania (AFP) Sept 23, 2009

http://www.energy-daily.com/reports/G20_leaders_agree_to_phase_out_fossil_fuel_subsidies_999.html

Leaders of emerging and developed nations agreed Friday to a US plan to phase out government subsidies for fossil fuel blamed for global warming, a joint statement said.

"We commit to rationalize and phase out over the medium term inefficient fossil fuel subsidies that encourage wasteful consumption," the leaders said after a two-day Group of 20 summit in Pittsburgh.

The leaders asked their energy and finance ministers to "develop implementation strategies and time frames" for the phasing out of the subsidies.

"We call on all nations to adopt policies that will phase out such subsidies worldwide," the statement said.

The leaders however underlined "the importance of providing those in need with essential energy services, including through the use of targeted cash transfers and other appropriate mechanisms."

The US plan was part of efforts to combat climate change, enhance energy security, improve public health and the environment, promote faster economic growth and support more effective targeting of government resources for the poor, officials said.

Key G20 nations China, India, Russia and Brazil reportedly are among the top spenders of fossil fuel subsidies and are unlikely to easily agree to any plans to slash them.

Crustal Curvature

I realize that I have been bandying about the concepts of crustal shift and crustal curvature fairly freely recently, and unless you have gone back through my core article on the Pleistocene nonconformity and additional discussions sprinkled through this blog, you may be in difficulty. A little definition needs to be refreshed and perhaps tightened up.

First, a crustal shift is a movement of the entire crust of the Earth as a thin one hundred mile thick or so layer of crustal material that we are familiar with as a single unit. It is a little bit like the rind of an orange on the Earth’s core. It is possible because there is a thin layer of molten carbon at the interface between the core and the crust. At rare intervals some of this carbon rockets to the surface at the rate of seventy or so miles per hour to form diamond pipes. This also confirms near zero viscosity as might also be theoretically expected from our knowledge of carbon behavior. Recall also that carbon has the highest known melting point and this is the reason it can be brought down to this depth.

Once the crust is in motion this rind conflicts with the fact that the earth is not a perfect sphere, but is larger around the equator that around the poles. This ultimately acts to halt the motion rather quickly as the carbon layer get pinched off through the motion of the crust. This plausibly places an upper limit on the thickness of this unique layer. The evidence shows that the process allows a thirty degree shift from the pole itself.

A natural result is to dynamically change curvature throughout the crust. In our case where the shift took place on an arc passing through the poles themselves, the maximum curvature change takes place along this arc.

We can imagine curvature as a grid square associated with any point on the crust. As this square passes over various parts of the core it is either been compressed or stretched. For example, as the region of the Indian Ocean approached and rode onto the equatorial ‘bulge’ the crust was stretched. This induced a region of extensive subsidence to accommodate this stretching. Mountains collapsed and sank thousands of feet.

On the other side of the equator the square became compressed and we have uplift of both the Tibetan plateau and the boundary range as a release mechanism.

These examples are placed in the area of maximum activity. The same thing happened on the other side of the globe impacting the Caribbean and the Andes. Africa was barely touched because the rotation centered there as it also did in the Pacific. It was the region of least curvature change.

Approaching geography with that in mind, one can look at a given piece of terrain somewhat differently. Knowing we have a recent disturbance that is slowly sorting itself out allows us to investigate a square and map movements with a new assurance and also a new conjecture. That the event mapped may not be part of a longer term continuing process. What if certain sections of the Rockies are truly recent? It is easy to figure out what is not recent, but certain terrains are good candidates for an abrupt rising twelve and a half thousands of years ago.

And I must point out an important consideration. It rocks that are millions and billions of years old got moved around just yesterday, it would still be difficult if not impossible to pin down the actual time of the event. Anything like the actual biome on top would be shattered and ground to oblivion. We really do have to find a plant trap high in the Andes or the Himalayas that can be aged. This is you must admit is a pretty tall order.

Once we make the conjecture that parts of our physical world were rearranged recently, it is not too hard to sort out areas of interest. After all a suite of weathered rock that is rotted out, did not happen recently. It took plausibly millions of years of effort. Yet a few miles away one is confronted with exposed and unrotted rock.

The coast crystalline range on the Pacific North West shows the most modest weathering that could be expected yet it is integral to the only temperate rain forest on Earth. Yet the range buts up against a deeply rotted central plateau that exhibits deeply rotted rocks. This region is arid been in the rain shadow of the coastal range. In truth we have largely the opposite of expectations although one could argue that the excessive rain of the coast has swept debris away. In fact we have argued that glaciation has scoured all these mountains out and the `effects of glaciation mask all this terrain.

The salient point here is that a lot of disturbed terrain can be convincingly written up to support either option. And I hate to say this but a lot of geological interpretive work suffers from this characteristic.

Dedollarization at Yakaterinburg

This had to happen of course. Wall Street’s betrayal of US sovereign interests must have consequences. The damage was direct, though actually minor but clearly blamable on Wall Street taking complete advantage of fifty years of global confidence in the good sense of the US Federal Reserve.

I am saying that the damage was minor outside of the USA because the international credit system is still intact because governments stepped up to underwrite the capital losses immediately. They are now stimulating recovery trade to get it all working again. So this is a case in which the USA caught pneumonia while the rest of the world suffered a nasty flue. For fifty years, it has been the other way around and this is lost on no one.

What has changed is the size of US consumption. It has shrunk. It is easily replaced by a modest increase in global consumption which appears to have already happened. To put this in perspective, a ten percent drop in US consumption is easily repaired by a less than one percent increase globally. It really feels like this has happened and that global demand will support everything while the USA gets it act back together, however long they wish to spend on it.

The creation of a global currency has merit and needs to include the US dollar, the EU, and the Chinese and Indian Currencies in order to have the political weight to make it possible for everyone to fit in. The EU is a good example of the process itself.

Once the four major economies can create a working framework and get it out of the hands of the US political system, it will be easy for every one else to pile in. This is a good plan that must surely take years to implement. Thus Yakaterinburg is only the beginning of the beginning of a process that is both inevitable but also certain to limp along for years if not decades.

De-Dollarization: Dismantling America's Financial-Military Empire
The Yekaterinburg Turning Point

By Prof. Michael Hudson

URL of this article: www.globalresearch.ca/index.php?context=va&aid=13969

Global Research, June 13, 2009

The city of Yakaterinburg, Russia's largest east of the Urals, may become known not only as the death place of the tsars but of American hegemony too – and not only where US U-2 pilot Gary Powers was shot down in 1960, but where the US-centered international financial order was brought to ground.

Challenging America will be the prime focus of extended meetings in Yekaterinburg, Russia (formerly Sverdlovsk) today and tomorrow (June 15-16) for Chinese President Hu Jintao, Russian President Dmitry Medvedev and other top officials of the six-nation Shanghai Cooperation Organization (SCO). The alliance is comprised of Russia, China, Kazakhstan, Tajikistan, Kyrghyzstan and Uzbekistan, with observer status for Iran, India, Pakistan and Mongolia. It will be joined on Tuesday by Brazil for trade discussions among the BRIC nations (Brazil, Russia, India and China).

The attendees have assured American diplomats that dismantling the US financial and military empire is not their aim. They simply want to discuss mutual aid – but in a way that has no role for the United States, NATO or the US dollar as a vehicle for trade. US diplomats may well ask what this really means, if not a move to make US hegemony obsolete. That is what a multipolar world means, after all. For starters, in 2005 the SCO asked Washington to set a timeline to withdraw from its military bases in Central Asia. Two years later the SCO countries formally aligned themselves with the former CIS republics belonging to the Collective Security Treaty Organization (CSTO), established in 2002 as a counterweight to NATO.

Yet the meeting has elicited only a collective yawn from the US and even European press despite its agenda is to replace the global dollar standard with a new financial and military defense system. A Council on Foreign Relations spokesman has said he hardly can imagine that Russia and China can overcome their geopolitical rivalry,1 suggesting that America can use the divide-and-conquer that Britain used so deftly for many centuries in fragmenting foreign opposition to its own empire. But George W. Bush (“I'm a uniter, not a divider”) built on the Clinton administration's legacy in driving Russia, China and their neighbors to find a common ground when it comes to finding an alternative to the dollar and hence to the US ability to run balance-of-payments deficits ad infinitum.

What may prove to be the last rites of American hegemony began already in April at the G-20 conference, and became even more explicit at the St. Petersburg International Economic Forum on June 5, when Mr. Medvedev called for China, Russia and India to “build an increasingly multipolar world order.” What this means in plain English is: We have reached our limit in subsidizing the United States' military encirclement of Eurasia while also allowing the US to appropriate our exports, companies, stocks and real estate in exchange for paper money of questionable worth.

"The artificially maintained unipolar system,” Mr. Medvedev spelled out, is based on “one big centre of consumption, financed by a growing deficit, and thus growing debts, one formerly strong reserve currency, and one dominant system of assessing assets and risks.”2 At the root of the global financial crisis, he concluded, is that the United States makes too little and spends too much. Especially upsetting is its military spending, such as the stepped-up US military aid to Georgia announced just last week, the NATO missile shield in Eastern Europe and the US buildup in the oil-rich Middle East and Central Asia.

The sticking point with all these countries is the US ability to print unlimited amounts of dollars. Overspending by US consumers on imports in excess of exports, US buy-outs of foreign companies and real estate, and the dollars that the Pentagon spends abroad all end up in foreign central banks. These agencies then face a hard choice: either to recycle these dollars back to the United States by purchasing US Treasury bills, or to let the “free market” force up their currency relative to the dollar – thereby pricing their exports out of world markets and hence creating domestic unemployment and business insolvency.

When China and other countries recycle their dollar inflows by buying US Treasury bills to “invest” in the United States, this buildup is not really voluntary. It does not reflect faith in the U.S. economy enriching foreign central banks for their savings, or any calculated investment preference, but simply a lack of alternatives. “Free markets” US-style hook countries into a system that forces them to accept dollars without limit. Now they want out.

This means creating a new alternative. Rather than making merely “cosmetic changes as some countries and perhaps the international financial organisations themselves might want,” Mr. Medvedev ended his St. Petersburg speech, “what we need are financial institutions of a completely new type, where particular political issues and motives, and particular countries will not dominate.”

When foreign military spending forced the US balance of payments into deficit and drove the United States off gold in 1971, central banks were left without the traditional asset used to settle payments imbalances. The alternative by default was to invest their subsequent payments inflows in US Treasury bonds, as if these still were “as good as gold.” Central banks now hold $4 trillion of these bonds in their international reserves – land these loans have financed most of the US Government's domestic budget deficits for over three decades now! Given the fact that about half of US Government discretionary spending is for military operations – including more than 750 foreign military bases and increasingly expensive operations in the oil-producing and transporting countries – the international financial system is organized in a way that finances the Pentagon, along with US buyouts of foreign assets expected to yield much more than the Treasury bonds that foreign central banks hold.

The main political issue confronting the world's central banks is therefore how to avoid adding yet more dollars to their reserves and thereby financing yet further US deficit spending – including military spending on their borders?

For starters, the six SCO countries and BRIC countries intend to trade in their own currencies so as to get the benefit of mutual credit that the United States until now has monopolized for itself. Toward this end, China has struck bilateral deals with Argentina and Brazil to denominate their trade in renminbi rather than the dollar, sterling or euros,3 and two weeks ago China reached an agreement with Malaysia to denominate trade between the two countries in renminbi.[4] Former Prime Minister Tun Dr. Mahathir Mohamad explained to me in January that as a Muslim country, Malaysia wants to avoid doing anything that would facilitate US military action against Islamic countries, including Palestine. The nation has too many dollar assets as it is, his colleagues explained. Central bank governor Zhou Xiaochuan of the People's Bank of China wrote an official statement on its website that the goal is now to create a reserve currency “that is disconnected from individual nations.”5 This is the aim of the discussions in Yekaterinburg.

In addition to avoiding financing the US buyout of their own industry and the US military encirclement of the globe, China, Russia and other countries no doubt would like to get the same kind of free ride that America has been getting. As matters stand, they see the United States as a lawless nation, financially as well as militarily. How else to characterize a nation that holds out a set of laws for others – on war, debt repayment and treatment of prisoners – but ignores them itself? The United States is now the world's largest debtor yet has avoided the pain of “structural adjustments” imposed on other debtor economies. US interest-rate and tax reductions in the face of exploding trade and budget deficits are seen as the height of hypocrisy in view of the austerity programs that Washington forces on other countries via the IMF and other Washington vehicles.

The United States tells debtor economies to sell off their public utilities and natural resources, raise their interest rates and increase taxes while gutting their social safety nets to squeeze out money to pay creditors. And at home, Congress blocked China's CNOOK from buying Unocal on grounds of national security, much as it blocked Dubai from buying US ports and other sovereign wealth funds from buying into key infrastructure. Foreigners are invited to emulate the Japanese purchase of white elephant trophies such as Rockefeller Center, on which investors quickly lost a billion dollars and ended up walking away.

In this respect the US has not really given China and other payments-surplus nations much alternative but to find a way to avoid further dollar buildups. To date, China's attempts to diversify its dollar holdings beyond Treasury bonds have not proved very successful. For starters, Hank Paulson of Goldman Sachs steered its central bank into higher-yielding Fannie Mae and Freddie Mac securities, explaining that these were de facto public obligations. They collapsed in 2008, but at least the US Government took these two mortgage-lending agencies over, formally adding their $5.2 trillion in obligations onto the national debt. In fact, it was largely foreign official investment that prompted the bailout. Imposing a loss for foreign official agencies would have broken the Treasury-bill standard then and there, not only by utterly destroying US credibility but because there simply are too few Government bonds to absorb the dollars being flooded into the world economy by the soaring US balance-of-payments deficits.

Seeking more of an equity position to protect the value of their dollar holdings as the Federal Reserve's credit bubble drove interest rates down China's sovereign wealth funds sought to diversify in late 2007. China bought stakes in the well-connected Blackstone equity fund and Morgan Stanley on Wall Street, Barclays in Britain South Africa's Standard Bank (once affiliated with Chase Manhattan back in the apartheid 1960s) and in the soon-to-collapse Belgian financial conglomerate Fortis. But the US financial sector was collapsing under the weight of its debt pyramiding, and prices for shares plunged for banks and investment firms across the globe.

Foreigners see the IMF, World Bank and World Trade Organization as Washington surrogates in a financial system backed by American military bases and aircraft carriers encircling the globe. But this military domination is a vestige of an American empire no longer able to rule by economic strength. US military power is muscle-bound, based more on atomic weaponry and long-distance air strikes than on ground operations, which have become too politically unpopular to mount on any large scale.

On the economic front there is no foreseeable way in which the United States can work off the $4 trillion it owes foreign governments, their central banks and the sovereign wealth funds set up to dispose of the global dollar glut. America has become a deadbeat – and indeed, a militarily aggressive one as it seeks to hold onto the unique power it once earned by economic means. The problem is how to constrain its behavior. Yu Yongding, a former Chinese central bank advisor now with China's Academy of Sciences, suggested that US Treasury Secretary Tim Geithner be advised that the United States should “save” first and foremost by cutting back its military budget. “U.S. tax revenue is not likely to increase in the short term because of low economic growth, inflexible expenditures and the cost of ‘fighting two wars.'”6

At present it is foreign savings, not those of Americans that are financing the US budget deficit by buying most Treasury bonds. The effect is taxation without representation for foreign voters as to how the US Government uses their forced savings. It therefore is necessary for financial diplomats to broaden the scope of their policy-making beyond the private-sector marketplace. Exchange rates are determined by many factors besides “consumers wielding credit cards,” the usual euphemism that the US media cite for America's balance-of-payments deficit. Since the 13th century, war has been a dominating factor in the balance of payments of leading nations – and of their national debts. Government bond financing consists mainly of war debts, as normal peacetime budgets tend to be balanced. This links the war budget directly to the balance of payments and exchange rates.

Foreign nations see themselves stuck with unpayable IOUs – under conditions where, if they move to stop the US free lunch, the dollar will plunge and their dollar holdings will fall in value relative to their own domestic currencies and other currencies. If China's currency rises by 10% against the dollar, its central bank will show the equivalent of a $200 million loss on its $2 trillion of dollar holdings as denominated in yuan. This explains why, when bond ratings agencies talk of the US Treasury securities losing their AAA rating, they don't mean that the government cannot simply print the paper dollars to “make good” on these bonds. They mean that dollars will depreciate in international value. And that is just what is now occurring. When Mr. Geithner put on his serious face and told an audience at Peking University in early June that he believed in a “strong dollar” and China's US investments therefore were safe and sound, he was greeted with derisive laughter.7

Anticipation of a rise in China's exchange rate provides an incentive for speculators to seek to borrow in dollars to buy renminbi and benefit from the appreciation. For China, the problem is that this speculative inflow would become a self-fulfilling prophecy by forcing up its currency. So the problem of international reserves is inherently linked to that of capital controls. Why should China see its profitable companies sold for yet more freely-created US dollars, which the central bank must use to buy low-yielding US Treasury bills or lose yet further money on Wall Street?

To avoid this quandary it is necessary to reverse the philosophy of open capital markets that the world has held ever since Bretton Woods in 1944. On the occasion of Mr. Geithner's visit to China, “Zhou Xiaochuan, minister of the Peoples Bank of China, the country's central bank, said pointedly that this was the first time since the semiannual talks began in 2006 that China needed to learn from American mistakes as well as its successes” when it came to deregulating capital markets and dismantling controls.8

An era therefore is coming to an end. In the face of continued US overspending, de-dollarization threatens to force countries to return to the kind of dual exchange rates common between World Wars I and II: one exchange rate for commodity trade, another for capital movements and investments, at least from dollar-area economies.

Even without capital controls, the nations meeting at Yekaterinburg are taking steps to avoid being the unwilling recipients of yet more dollars. Seeing that US global hegemony cannot continue without spending power that they themselves supply, governments are attempting to hasten what Chalmers Johnson has called “the sorrows of empire” in his book by that name – the bankruptcy of the US financial-military world order. If China, Russia and their non-aligned allies have their way, the United States will no longer live off the savings of others (in the form of its own recycled dollars) nor have the money for unlimited military expenditures and adventures.

US officials wanted to attend the Yekaterinburg meeting as observers. They were told No. It is a word that Americans will hear much more in the future.

Notes

1 Andrew Scheineson, “The Shanghai Cooperation Organization,” Council on Foreign Relations,
Updated: March 24, 2009: “While some experts say the organization has emerged as a powerful anti-U.S. bulwark in Central Asia, others believe frictions between its two largest members, Russia and China, effectively preclude a strong, unified SCO.”

2 Kremlin.ru, June 5, 2009, in Johnson's Russia List, June 8, 2009, #8.

3 Jamil Anderlini and Javier Blas, “China reveals big rise in gold reserves,” Financial Times, April 24, 2009. See also “Chinese political advisors propose making yuan an int'l currency.” Beijing, March 7, 2009 (Xinhua). “The key to financial reform is to make the yuan an international currency, said [Peter Kwong Ching] Woo [chairman of the Hong Kong-based Wharf (Holdings) Limited] in a speech to the Second Session of the 11th National Committee of the Chinese People's Political Consultative Conference (CPPCC), the country's top political advisory body. That means using the Chinese currency to settle international trade payments ...”

4 Shai Oster, “Malaysia, China Consider Ending Trade in Dollars,” Wall Street Journal, June 4, 2009.

5 Jonathan Wheatley, “Brazil and China in plan to axe dollar,” Financial Times, May 19, 2009.

6 “Another Dollar Crisis inevitable unless U.S. starts Saving - China central bank adviser. Global Crisis ‘Inevitable' Unless U.S. Starts Saving, Yu Says,” Bloomberg News, June 1, 2009.
http://www.bloomberg.com/apps/news?pid=20601080&sid=aCV0pFcAFyZw&refer=asia

7 Kathrin Hille, “Lesson in friendship draws blushes,” Financial Times, June 2, 2009.

8 Steven R. Weisman, “U.S. Tells China Subprime Woes Are No Reason to Keep Markets Closed,” The New York Times, June 18, 2008.

Global Reserve Banking

A timely essay out of China on the need to create a global reserve currency that is able to obviously discipline members. This a natural response to the crash and burn imposed by the US financial leadership and equally the European financial leadership. The built-in conflicts of the current regime make it unlikely that such will be led by the USA particularly. After all, global acceptance of the US dollar is what greased the current disaster. It has been the golden goose until everyone became insanely greedy.

China and India need to join forces and start the process moving. If they create a viable reserve currency situation and convince most other countries to participate outside of America and Europe, the momentum will be established and the real problem can then be addressed. That is how to retire the ocean of US currency now acting as the reserve currency.

Odds are it will then have a natural solution that everyone is happy with.

China and India today have the growing moral authority to pull this off and it will also enhance their growing stature as they consolidate their economic gains. They needed this market break as badly as the overheated US did. Their cooperation now would be massively beneficial to the global economy.


China: Time For a New Global Currency

Tuesday, March 24, 2009 8:21 AM

China is calling for a new global currency controlled by the International Monetary Fund, stepping up pressure ahead of a London summit of global leaders for changes to a financial system dominated by the U.S. dollar and Western governments.

The comments, in an essay by the Chinese central bank governor released late Monday, reflect Beijing's growing assertiveness in economic affairs. China is expected to press for developing countries to have a bigger say in finance when leaders of the Group of 20 major economies meet April 2 in London to discuss the global crisis.

Gov. Zhou Xiaochuan's essay did not mention the dollar by name but said the crisis showed the dangers of relying on one nation's currency for international payments. In an unusual step, the essay was published in both Chinese and English, making clear it was meant for an international audience.

"The crisis called again for creative reform of the existing international monetary system towards an international reserve currency," Zhou wrote.
A reserve currency is the unit in which a government holds its reserves. But Zhou said the proposed new currency also should be used for trade, investment, pricing commodities and corporate bookkeeping.

Beijing has long been uneasy about relying on the dollar for the bulk of its trade and to store foreign reserves. Premier Wen Jiabao publicly appealed to Washington this month to avoid any steps in response to the crisis that might erode the value of the dollar and Beijing's estimated $1 trillion holdings in Treasuries and other U.S. government debt.

The currency should be based on shares in the IMF held by its 185 member nations, known as special drawing rights, or SDRs, the essay said. The Washington-based IMF advises governments on economic policy and lends money to help with balance-of-payments problems.

Some economists have suggested creating a new reserve currency to reduce reliance on the dollar but acknowledge it would face major obstacles. It would require acceptance from nations that have long used the dollar and hold huge stockpiles of the U.S. currency.

"There has been for decades talk about creating an international reserve currency and it has never really progressed," said Michael Pettis, a finance professor at Peking University's Guanghua School of Management.

Managing such a currency would require balancing the contradictory needs of countries with high and low growth or with trade surpluses or deficits, Pettis said. He said the 16 European nations that use the euro have faced "huge difficulties" in managing monetary policy even though their economies are similar.

"It's hard for me to imagine how it's going to be easier for the world to have a common currency for trade," he said.

China has pressed for changes to give developing countries more influence in the IMF, the World Bank and other finance bodies. G20 finance officials issued a statement at their last meeting calling for such changes but gave no details of how that might happen.

Russia also has called for such reforms and says it will press its case at the London summit.

Zhou said the new currency would let governments manage their economies more efficiently because its value would not be influenced by any one nation's need to regulate its own finance and trade.

"A super-sovereign reserve currency managed by a global institution could be used to both create and control global liquidity," Zhou wrote. "This will significantly reduce the risks of a future crisis and enhance crisis management capability."

Zhou also called for changing how SDRs are valued. Currently, they are based on the value of four currencies - the dollar, euro, yen and British pound.

"The basket of currencies forming the basis for SDR valuation should be expanded to include currencies of all major economies," Zhou wrote. "The allocation of the SDR can be shifted from a purely calculation-based system to one backed by real assets, such as a reserve pool, to further boost market confidence in its value."

Alien Invaders

This is the first hint that I have ever seen that alien bacteria might be infiltrating the atmosphere. It has been suggested but no one has ever actually claimed to have a prospective culture.

The immediate inference is that life is in fact universal throughout space and that we can expect conforming life forms throughout the universe. It may be possible to travel to a distant planet in another solar system and to expect to eat well.

The real inference is that any planet with the right stuff will immediately be invaded by life forms and evolution will commence. We do not need to reconstruct life from first principles each and every time.

This is the first such claim and it will be interesting to watch and to see what sort of consensus emerges. It is still to early to be optimistic.



New bacteria discovered in stratosphere

http://www.terradaily.com/reports/New_bacteria_discovered_in_stratosphere_999.html


by Staff Writers
Hyderabad, India (UPI) Mar 17, 2009

Scientists in India say they've found three species of bacteria in the stratosphere, all of which are alien to Earth and resistant to ultraviolet radiation.

One of the species has been named Janibacter hoylei, after the late astrophysicist Fred Hoyle. The others are named Bacillus isronensis, recognizing the contribution of the Indian Space Research Organization in the balloon experiments that led to its discovery, and Bacillus aryabhata after India's ancient astronomer Aryabhata and also the first ISRO satellite.

The experiment was conducted using a 26.7-million-cubic-foot balloon flown from the National Balloon Facility in Hyderabad, India. The payload consisted of a cryosampler containing 16 evacuated and sterilized stainless steel probes that were immersed in liquid neon to create a cryopump effect. The cylinders, after collecting air samples from different heights, were parachuted to Earth and retrieved.

In all, 12 bacterial and six fungal colonies were detected, nine of which showed greater than 98 percent similarity with known species on Earth, the researchers said. Three bacterial colonies were deemed new species.

Although the study doesn't conclusively establish an extraterrestrial origin of the microorganisms, it does provide encouragement to continue the work in the quest to explore the origin of life, the scientists said.